Q. I am single and 62 years old and could take my social security benefits now or wait a few years. What is the optimal social security strategy.
A. If you are healthy and have no budget constraints then you should wait till full retirement age(FRA) which for you is 66 and 4 months. If you remain healthy at FRA and have longevity in your family then you could wait till age 70 for the maximum benefits.
Q. What is the difference of taking social security benefits at age 62, at FRA or at age 70?
A. I will assume that you were born after 1959 and your FRA is 67. If you were to receive $2,000 per month at FRA and you started your benefits early at age 62, then your reduced benefits would be 30% lower at $1,400 per month. If you waited till age 70, your monthly benefits would increase by 24% to $2,480. Additionally, any year that benefits increase due to an inflation adjustment, your benefits will increase.
Q. What are the new tax brackets for 2018?
A. The tax brackets range from 10% to 37%.
Marginal Rate Single Married Filing Jointly
10% 0-$9,525 0-$19,050
12% $9,526-$38,700 $19,501-$77,400
22% $38,701-$82,500 $77,401-$165,000
24% $82,501-$157,500 $165,001-$315,000
32% $157,501-$200,000 $315,001-$400,000
35% $200,001-$500,000 $400,001-$600,000
37% over $500,000 over $600,000
Q. I am 65 years old. Do I receive a higher standard deduction for 2018?
A. Yes, if you are 65 or older your standard deduction will bump up by $1,300. If you file singly your standard deduction will be $13,300. If filing married and your spouse is 65 or older then your standard deduction will double to $26,600.
Q. An insurance agent is trying to sell me an annuity but I am not comfortable with this investment. What is an annuity?
A. If you are uncomfortable with any investment, never invest. An annuity is a contract between you and an insurance company. A fixed annuity pays a fixed rate of interest for a specific period of time and a variable annuity allows you to select investments with your return based on the investment performance. Annuities are not CD substitutes and are not life insurance policies. Annuities are expensive due to the layers of fees(management, administrative and mortality). Additionally, if you cancel the annuity early you will pay a surrender charge. A glaring disadvantage of variable annuities is the gains are taxed at ordinary rates and do not receive any favorable tax treatment.
Q. My brother mentioned that Michigan imposes taxes on pensions. How does MI tax pensions and social security benefits?
A. If you were born before 1946 there are no changes. If you were born between 1/1/1946 and 12/31/1952 you will get a pension exemption of $20,000 for single filers, $40,000 for joint filers. If you were born after 1952, your pension and investment income will be taxed at the current 4.25 percent rate until age 67, then you can use a $20,000/$40,000 exemption against all income or elect to offset your social security, military or railroad pension. If you were born after 1945 and your household income exceeds $75,000(single) or $150,000(joint)there is no pension exemption.
Q. Somebody stole my social security number and is impersonating me. Can I change my social security number and reclaim my identity?
A. You can’t easily change your Social Security number even it has been stolen. Identity theft is one of the fastest growing crimes in America. First, contact one of the three major credit-reporting a agencies — Equifax, TransUnion, or Experian to place a fraud alert on your credit file. Second, call the IRS at 1-800-908-4490 to prevent the thief from filing a fraudulent
tax return in your name. Third, contact the fraud department of each company that you suspect fraudulent activity.
Q. I am considering a nursing home for my husband who is suffering from dementia and alzheimer’s disease. The nursing home refuses to admit him because I have no power of attorney. What can I do?
A. You can go to court and be appointed the conservator of your husband, check with different nursing homes on their rules. If you still have difficulty then I recommend that you consult with an elder attorney.
Q. I’m retired and drawing Social Security. Can I count my Social Security as income to open a Roth IRA account?
A. No, you must have earned income, money that you receive for your labor. Social Security benefits, pensions, interest, dividends, rental income and capital gains are not earned income.
Richard Rysiewski, a Certified Financial Planner®, welcomes all questions on tax and financial matters. Please send to Richard Rysiewski, Financial Doctor, 3001 Hartford Lane, Shelby Twp., MI 48316 or call (248)651-7710.